Liberalization and Democratization: The Forum and the Hearth in the Era of Cosmopolitan Post-Industrial Capitalism
Picciotto, Sol, Law and Contemporary Problems
SOL PICCIOTTO [*]
THE MISNOMER OF PRIVATIZATION
The processes described under the misleading term "privatization" have been part of a major social restructuring in both the political and economic spheres. Most notably, widespread state failures have resulted in significant changes in the form and functions of the state. This reform encompasses not only the collapse of state socialism, but also crises and radical reforms in developed capitalist states, including U.S. regulated corporatism, European-style social-democratic welfare states, and the developmental states of Japan and the Asian "tigers." The causes of these changes have been equally diverse, involving a mixture of both political and economic factors. Nevertheless, these processes have much in common, entailing a transition to post-industrial capitalism, or what Manuel Castells has called the "Information Age." 
The crisis of the state has been most evident in eastern Europe and the former Union of Soviet Socialist Republics, which experienced a systemic social crisis of both political autocracy and economic centralization. Elsewhere, the relationships between the political and economic aspects have been less explicit, and thus the overall nature of the processes has been harder to grasp. One linking element has been the increased difficulty of legitimizing public expenditures from general taxes--especially those paid by direct taxes on income. This problem applied not only to social and welfare spending, but also to public funding of the renewal of infrastructure, in particular, expenses to keep pace with emerging needs and technologies in areas such as transportation and telecommunications.
At the same time, political systems found it increasingly difficult to resolve conflicting claims and demands in public services. New mechanisms were devised to decentralize decisionmaking and introduce "market principles" into public sector resource allocation. Although these changes were often presented as a decentralization or devolution of power, this characterization was in many respects misleading because the power devolved was generally limited to micro-management of shrinking resources within the parameters defined from above. I had first-hand experience of this process as an elected school governor from 1989 to 1991, not long after the British Conservative government had introduced devolved budgetary management in schools. That system was billed as a transfer of power from local education authorities to head-teachers and governors. In practice, it relieved our local authority of the responsibility for difficult decisions, such as deciding whether to close small rural schools or balancing staffing ne eds against book purchasing; however, central government essentially determined the parameters for these decisions by setting the weighting criteria for budgetary allocations to schools. Similar attempts were made in other public services, such as health care.
Thus, although there has been much political talk of "rolling back the state," the process has largely consisted of remodeling the "public" sphere of politics and its relationship to the "private" sphere of economic activity. This is shown even by crude measures, such as state expenditure as a proportion of Gross Domestic Product ("GDP"), which has scarcely fallen even in countries where there has been extensive privatization.  At the same time, major transformations have also been occurring in the forms of organization of so-called private enterprise, that is, the business economy dominated by the giant corporation. Large-scale mass manufacturing has been reorganized, and the centralized bureaucratic firm has become the "lean and mean" corporation, concentrating on its "core competencies" but operating within a web of strategic alliances, supplier chains, and financial and governmental networks. 
Many of these changes have been driven by social pressures from below. …